Understanding Risk

Understanding risk is really important. I think it is important both from the wealth manager’s point of view but particularly from the client point of view. The minute you take money from a deposit account, well arguably there is still risk even on a deposit account, particularly after 2008 when we say that banks weren’t infallible. But the minute you take money from a bank account and move into equity markets you are taking investment risk. It is incredibly important people understand that and that they are comfortable with the level of risk that they take.
Portfolios are comprised of different asset classes, property, cash, equities, bonds and the combination of those dictates the level of risk that is being carried in the portfolio.
We take talking to clients about risk incredibly seriously. We even have a specific document that we discuss with clients and it talks about all the different risks involved and there are many of them. It is not just market risk there is political risk, tax risk, default risk, liquidity risk, there are lots and lots of them.
That is why I think it is important that clients understand what they are getting into when they venture into the investment markets.
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